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Financing Ventures

Author

Listed:
  • Jeremy Greenwood

    (University of Pennsylvania)

  • Juan Sanchez

    (Federal Reserve Bank of St. Louis)

  • Pengfei Han

    (University of Pennsylvania)

Abstract

The relationship between venture capital and growth is examined using an endogenous growth model incorporating dynamic contracts between entrepreneurs and venture capitalists. At each stage of fi nancing, venture capitalists evaluate the viability of startups. If viable, VCs provide funding for the next stage. The success of a project depends on the amount of funding. The model is confronted with stylized facts about venture capital; viz., statistics by funding round concerning the success rate, failure rate, investment rate, equity shares, and the value of an IPO. Raising capital gains taxation reduces growth and welfare.

Suggested Citation

  • Jeremy Greenwood & Juan Sanchez & Pengfei Han, 2018. "Financing Ventures," 2018 Meeting Papers 1204, Society for Economic Dynamics.
  • Handle: RePEc:red:sed018:1204
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    References listed on IDEAS

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    8. Gompers, Paul A. & Gornall, Will & Kaplan, Steven N. & Strebulaev, Ilya A., 2020. "How do venture capitalists make decisions?," Journal of Financial Economics, Elsevier, vol. 135(1), pages 169-190.
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    Citations

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    Cited by:

    1. Juan M. Sanchez, 2019. "Tax Cuts, Venture Capital, and Long-Term Growth," Economic Synopses, Federal Reserve Bank of St. Louis, issue 22, August.
    2. Murat Celik & Xu Tian, 2018. "Corporate Governance, Managerial Compensation, and Disruptive Innovations," 2018 Meeting Papers 590, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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